In at interview to CNBC-TV18's Anuj Singhal, SP Tulsian of sptulsian.com spoke about his readings and outlook on the fundamentals of the market and specific stocks.
Below is the verbatim transcript of the interview.
Q: CESC is down 7 percent as we speak. Do you think the stock has made a near-term top and should we expect more decline from here now that the news is out or will you use this as a buying opportunity?
A: Looks like the stock has made its near-term top and probably I do not think that top is going to be seen getting revisited maybe in the next couple of months as well because if you take a call on the restructuring move, sometimes I do not understand, in fact, I have said that, or I expressed my view earlier also. We see the management getting overboard in hiving off the generation in one company and distribution in one company. If you see these companies, if I just give the names of these two companies, one is CESC and second is Torrent Power and even if you visit their sites and all that, they will proudly claim as an integrated power company because they are into generation, they are into transmission and they are into distribution.
So, all along if they have been harping upon them being an integrated power company because obviously, integrated operations have its advantages and if you claim that to be, because at one time, maybe Reliance Infra used to be an integrated power company. So, if you take that pride in calling yourself as an integrated power company and then maybe after hearing the financial analysts or maybe not by going by your conviction. If you break the generation in one company and distribution in another company, honestly I see that as a value destruction and as a futile exercise.
Coming on the other two, that is the transfer of the retail of Spencer into third company and fourth is the business process outsourcing (BPO), fast moving consumer goods (FMCG) kind of things, those things are seen quite logical, but again, we know that the BPO company, the stake of 55 percent is already held by CESC wholly owned subsidiary, but any way, because maybe probably one could argue that the holding company discount was not seeing that value getting flown to the value of the shareholders' of CESC. But that value was quite negligible to the extent of about 11-12 percent, but nevertheless, the move of restructuring, that is company three and company four seems to be logical, but I do not think that market will really or even the financial analysts will really be happy with company having broken for generation one company and distribution another company.
Q: Your thoughts on IDBI Bank? You have been positive on some of the larger PSU banks.
A: A big howler. Extremely poor numbers. The kind of liberalness which we have seen in rising these all stressed assets, Rs 35,000-45,000 crore for gross. Net Rs 21,000-25,000 crore. Sometimes I feel that I do not know what these bank officials are really doing at IDBI Bank. And that hugely disappointing number. And if you see this continuing the point which Prakash Diwan has stated of the book value. In fact, the book value for IDBI Bank is closer to maybe about Rs 90.
And if you see that if the price to book is seen at maybe about 0.7 or 0.75, I do not think that you have much comfort. In fact I have touched upon this point in case of Oriental Bank when they came out with their numbers a couple of days back where there has been improvement in the asset quality and the price to book is at 0.4-0.45. So you have that comfort as well, but those things are seen really missing and I do not know the government's plans which is being talked for last one year of induction of the strategic investor in IDBI Bank whether looking to these numbers, anyone will really have the courage to come in into this bank.
Q: So, what is the advice for anyone who is stuck in CESC because we have people who will get stuck of course, at all sorts of levels. What is the advice here? Rs 845 now on the stock.
A: Advice was given when the share was down 10 percent that this is not a pragmatic move and I do not think that even at that time, we have not discussed about 10 minutes back we have not discussed on the financial results. If you see the Q4 numbers, again a big howler on the operating level. If you remove the Rs 300 crore receipt of the tariff differential in Q4, otherwise the numbers are really seen horrible and if you take the debt position also of the company on a consolidated basis, Rs 14,000 crore debt on a market cap of Rs 11,000 crore and if you see their business segments, sometimes, I am unable to understand, I do not know whether you have noticed that segment reporting.
The power business is showing kind of stagnation. I do not know how they will break that into generation and distribution and what will be the situation on those two fronts. Apart from that retail is already losing. BPO, we know that listed company, that has already been giving them a stagnated kind of performance. So, I do not know where the attraction is in respect to the Q4 numbers or in respect to this restructuring move. What is the wisdom which has really prevailed on initiating this kind of a restructuring move.
Q: What stocks would you recommend? This remains a bull market, so what stocks would you recommend investors to use this dip as buying opportunity? Any 2-3 names that would top out?
A: If I take two sectors, first let me touch upon the sectors. One is sugar and second is non-banking finance company (NBFC) because after seeing the Dwarikesh Sugar Industries number, again people have misunderstood market has seen a Rs 52 crore provision of tax in Q4 which was not there in the earlier three quarters. That is for the deferred tax. So it is a non-cash item. This is just a book entry. So, these are two sectors.
But coming specifically on the stocks since you have asked me the stock names, probably I will have the 3-4 stocks in my mind. One could be, because as I said that NBFC looks a good bet to enter into Bajaj Finance because looking to the Q4 numbers and the management commentary, that looks very good. Having seen the numbers of Dwarikesh sugar, probably I will go long on or I will advise buying on Balrampur Chini Mills and Dwarikesh Sugar and third could be Triveni Engineering.
So, these are the few stocks and if you need to choose one from the agriculture space, that could be Jayant Agro having corrected and with good numbers having seen from the company. So, these are the few ideas where one can really take a call on a selective basis in this market.
Q: I heard you say sugar and NBFCs. You gave out some names. Would Bharat Financial Inclusion be part of that? It has fallen quite a bit today, down about 7 percent.
A: Yes, I will go with Bharat Financial and I can add the Cholamandalam Investment and Finance Company also in the same category because I will be keeping myself away from the housing finance company for a while. But these three, if you want to widen the list of NBFCs, then probably Bajaj Finance, Bharat Financial and Cholamandalam Investment can definitely be looked into.
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